ANZ has announced a drop in profit for the last 12 months, with increased remediation costs and economic “headwinds” hurting the business’ success.
The bank’s cash profits dipped 5 per cent on a continuing basis in the year ending September 30 2018, though these losses grew to 16 per cent for cash profits including discontinued operations.
“Retail banking in Australia faced strong headwinds with housing growth slowing and borrowing capacity reducing,” the bank’s chief executive, Shayne Elliott, said in his comments to shareholders.
As a result of these tighter conditions, Mr Elliott said the bank “continued [its] disciplined approach to home loan growth” by focusing on loans to people looking to buy and own their own home.
“While this meant we sacrificed short-term revenue growth and higher margins in Australia, particularly in the investor and interest-only segments, it was the right thing to do for shareholders.”
ANZ also reported its expenses grew in the last year, chiefly driven by higher levels of compensation and remediation to be paid to consumers.
The bank previously warned its remediation efforts would sting annual profits, flagging a possible $824 million hit (more than half of which was related to customer compensation).
On October 12, Mr Elliott also admitted to the House of Representatives’ standing committee on economics that one of ANZ’s executives had described remediation of wronged customers as a “distraction”.
Well positioned for growth
Despite the hit to profits, Mr Elliott said the bank was positive on the coming years.
“We expect the tough revenue growth environment in retail banking to continue for the foreseeable future, however we are well positioned to take advantage of growth opportunities in institutional [banking], Asia, and New Zealand,” he said.
Mr Elliott said work the bank commenced in 2016 to simplify its business and “better focus on customers” has positioned the bank well to “manage any challenges ahead”.
Additionally, ANZ’s common equity tier one capital ratio (a measure of the money a bank has on hand to manage risks) increased sightly over the year.
Reserve Bank of Australia assistant governor Michele Bullock said on October 30 that Australia’s banks are far more resilient now than they were when the global financial crisis rocked economies worldwide in 2008, owing in a large part to their increased tier one capital ratios.